Technology has evolved rapidly over the last nine years and the nonprofit accounting software world has worked hard to keep pace with the changes. Not only have reporting requirements become more stringent, but the Internet has become commonplace and nonprofits are increasingly leveraging that power for reaching donors. As recently as five years ago, many organizations bypassed the niche nonprofit accounting software entirely in favor of off-the-shelf solutions like QuickBooks or Peachtree. Most strove to fit within the narrow confines of the standard accounting packages, which then promised much easier to use interfaces and more robust features.
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A lot has happened to improve nonprofit accounting software. True fund accounting capabilities have merged in with usability features borrowed from off-the-shelf programs. A graphical user interface and customizable reporting are now commonplace features which give organizations unprecedented power to craft a dream reporting system.
Here are five signals that it is time to ditch your canned system and move to a nonprofit system:
* You need fund accounting. True fund accounting is when your accounting system allows for multiple self-balancing charts of accounts. The key here is self- balancing. Should one chart of accounts (or fund) get out of balance, the true fund accounting system automatically creates the balancing entry.
This means separately updated fund balances. True, you can mimic fund accounting via manually adjusting journal entries and careful accounting. Just watch out though, because as your transaction volume grows you're going to find it impossible to manually track different funds in your chart of accounts.
Here is where "true" fund accounting systems shine. For example, when you make an entry between two funds - say the plant and endowment - your fund accounting software automatically creates the due-to, due-from entries that might be required under proper accounting rules.
For any nonprofit needing multiple self-balancing charts of accounts (funds), true fund accounting software is the recommended way to proceed.
* The organization is growing. Sooner or later the limitations of QuickBooks and Peachtree can become obvious. Sure, QuickBooks lets you keep unlimited history, but just try creating a useful report that draws upon more than three years of history. By the time the report is generated, it may be time for the next month's report.
As you add more users to your accounting department, the need for a larger and more robust system will be even more evident. The smaller systems typically function with a small numbers of users (fewer than five is a common cutoff) and beg for more horsepower when you exceed five users or need to use technology such as Terminal Server or Citrix.
* Funding sources require it. With the increasing focus on accurate corporate reporting, many funding sources are requiring ever more detailed reports. This nearly always means an adoption of true fund accounting principles as well as the tighter internal controls that accompany the nonprofit accounting systems.
Real-time accounting software, which generally lacks a formalized posting process, may make accounting a snap for small organizations, but it's generally a nightmare when it comes to leaving easily followed audit trails. A systematic procedure of posting registers as well as system files that track who made certain changes to accounting records are increasingly the norm and typically features you won't find on your low-end accounting system.
* Your project/grant reporting are on separate fiscal years. What do you do when your organization starts to gather more grants? The natural response is to celebrate your good fortune. Once the party's over, you'll be left with a hangover as you realize that each of these funding sources requires that you prepare financial reports on a different fiscal year.
When the number of such anomalies is small, manual accounting tricks can keep them under control. However, once you start to see rapid growth in the number of grants that need tracking, it's time to ditch the generic accounting system in exchange for a nonprofit package that allows for separately tracked fiscal years for each fund.
With this expanded reporting capability, you'll find your staff with more free time on their hands as they no longer need to prepare manual entries to close one set of funds mid-year. These funds are often on different fiscal years than your main entity. Managing one year-end close is difficult enough without having to potentially repeat the process monthly for a different fund. The time you save with a nonprofit-specific package will generally more than compensate for any increased cost or complexity in establishing the setup.
* Donations and revenues are growing. Congratulations, because growing revenues is a problem that many organizations would like to have. That is, of course, unless they are trying to squeeze the records of 1,500 donors into a single-user version of QuickBooks.
The time to get off on the right foot is when the donor problems are small. Avoid the temptation to squeeze the individual records of each donor into an off-the-shelf accounting system. A full-fledged donor tracking system (an available add-on for most nonprofit accounting software) will give your organization room to expand different giving campaigns.
* The board is picky about reports. Sure you've just saved a bundle by sticking within the narrow confines of Peachtree. But what do you do when the chair of your board of directors calls you late on a Friday afternoon to ask for a set of customized financial reports before Monday morning's board meeting? If you're like most, you desperately search for a way to dump data into Microsoft Excel. Instead, you should be using the built-in report writers that most nonprofit accounting systems offer. Instead of exporting and importing data to a separate program, a good report writer will allow you to save a multitude of special reports which you can call upon at any time.
AccuFund Accounting Suite
With more than 800 users of the software to their credit, AccuFund stands out because of its feature-rich, yet affordable, software. Single-user standalone versions, which include GL, AP, and Cash Management, are available starting at $ 2,995. Additional modules, such as Accounts Receivable and Allocations, are available starting at $1,000.
One of the nice features of this software is the inclusion of the Forms and Reports Designer in the core bundle of modules. There is an ample collection of reports that will get almost any nonprofit started with the system. When changes are needed, these are simple enough to accomplish through the Designer. A full-featured financial reporting tool is also included with the General Ledger within the core modules.
Smaller nonprofits will appreciate that the system posts in real time. There are no tedious posting processes. One click of the OK button and your transactions are instantly updated. On the Journal Entries screen, when a due-to, due-from entry is made, you can click on a special tab labeled "offset" to see where the adjusting entry is being applied.
Ease of use and affordability are two key attributes that make AccuFund attractive for the smaller nonprofit. The system does not offer a native fundraising system so you need to make sure that your need to track donors is not going to increase significantly. What it does offer is simplicity and that feature alone will attract many nonprofits that might otherwise be overcome by the bloated environments of those systems with a large number of seldom-used bells and whistles.
The system is exceptionally well-documented and there are separate training manuals available that clearly take you through all the steps a beginner would need to learn in order to make use of the software. The clean design and real-time posting make it a good match for almost any nonprofit seeking to beef up its accounting.
AccuFund Accounting Suite
Price: $29,995 (core system); multi-user starts at $4,195; $895 (each additional user).
MIP Fund Accounting
If there were three words that could sum up the MIP Fund Accounting system they'd have to be "room for growth." The intuitive interface with robust functionality makes for an extremely appealing package for nonprofits of all sizes.
New to Version 8 are native sales order, inventory, and purchase order modules. At first glance, it may seem odd that a nonprofit would think about such things, however many organizations have rapidly developed departments that raise money via sales of inventory items. Almost all nonprofits that are growing want to keep a keen eye on the budget. By using the newly beefed-up Purchase Order module, the proper amounts can be encumbered and tracked through all stages of approvals.
With MIP, you can have a General Ledger chart of accounts whose structure can be nearly any size. The flexibility in size is mind boggling as is the realization that versions of this software exist which are affordable (and useable) for even the smallest organizations.